Collaboration in Industry: Potential Areas of Growth

KEY CONCLUSIONS

Russia and African countries are interested in broad industrial cooperation

“I would single out five main strategic areas in which our companies have already begun building cooperation with our African colleagues. Above all, this involves the modernization of the existing industrial infrastructure, and in this regard, projects are being implemented to supply the latest Russian equipment for metallurgical and mining enterprises. The next area is the development of the transport and logistics system, including the supply of rolling stock for railways, airplanes, and helicopters of various classes and purposes, as well as security and control systems for these modes of transport. The third pillar for industrial cooperation is involvement in the creation of energy infrastructure, oil, gas, and generating capacities, including hydro and nuclear energy, as well as promising projects in renewable energy sources. Another cross-sectoral area incorporates the entire perimeter of food security issues […]. And, finally, we believe there are great prospects for our medical and pharmaceutical industries to take part in the technological development of the healthcare system and drug supply for all countries of the continent”, Russian Minister of Industry and Trade Denis Manturov said.

“We have identified two points for our presence in this region: the north, namely Egypt, where we are currently implementing a project to supply 1,300 passenger cars, and the south, namely South Africa. All that is left for us to do along with our colleagues present in this room is to build a trans-African highway, connect the northern and southern parts, and ensure appropriate the economic growth and industrial growth, while we will sell our passenger cars and locomotives”, said Kirill Lipa, General Director of Transmashholding.

“Our presence in Africa began more than ten years ago in 2008 with the acquisition of the bauxite mining company Sierra Mineral Holdings (SMHL). To date, production has exceeded 3 million tonnes, including 2 million tonnes of high-quality bauxite that is exported […]. Now we are pushing forward with the construction of a hydrated plant. The project involves the establishment of the first enterprise [in Sierra Leone] for the processing of non-metallurgical products with high added value. It will have capacity of 200,000 tonnes of aluminium hydrate per year”, said Karima Nigmatulina, General Director of Vi Holding.

“Our strategy is to diversify the African continent so that it receives investments from a variety of sources, including Russia. We view Russia as one of the main suppliers of these investments. We need experience in agriculture and the raw materials industries”, said Benedict Okey Oramah, President and Chairman of the Board of Directors of African Export-Import Bank (Afreximbank).

“There are so many areas in which we can collaborate. Egypt currently needs a large number of buses. It also needs to develop the transport system because the existing roads are extremely congested right now, and, of course, Russia is one of the leading countries in this area, so there is no doubt that Russia’s experience will help us. We have everything we need for this. We also have natural gas reserves. This is another area in which Russia is one of the world leaders, so our Russian colleagues can certainly help us here”, said His Excellency Amr Nassar, Minister of Trade and Industry of the Arab Republic of Egypt.

 

PROBLEMS

Heightened risks associated with investing in Africa

“We realize that we have a sort of time lag for when we can just be sellers [of mineral fertilizers]. But the local authorities will nevertheless raise the issue of localizing fertilizer production. And we will have a choice: either we take this risk, participate in joint ventures, and the leaders of the countries politely offer us to be partners with all the ensuing consequences – bring money, bring technology, set up distribution, and be responsible for financial risks – or we just remain traders, but then, if they build their own plants, the first thing that they will do is close this market off to external ones”, said Dmitry Mazepin, Chairman of the Board of Directors of URALCHEM UCC.

Lack of information

“Our community SADC [Southern African Development Community] has continued to cooperate with Russia for many years. We don’t only cooperate in the public sector, but also in the private sector. However, there aren’t many examples of successful collaboration in the private sector. In many ways, there are no joint private projects due to a lack of information. The information that we receive and provide here is very limited. Last year I was at the Moscow Chamber of Commerce and Industry, and it was very clear that the Chamber of Commerce doesn’t know much about Africa”, said SADC Executive Secretary Stergomena Lawrence Tax said.

 

SOLUTIONS

Systematic state support for business projects

“Systematic support from the state is one of the key conditions for the success of any business projects abroad. And, in this regard, we have developed a whole complex of measures. We have set the goal of identifying promising niches and areas of cooperation and assisting companies in establishing business ties with trade missions of the Russian Federation. There are four of them on the African continent: in Algeria, Egypt, Morocco, and South Africa […]. Our trade missions around the world work in close cooperation with the Russian Export Center, which administers non-financial and financial mechanisms to support the export of our products. They could significantly reduce the cost of Russian machinery and equipment. In addition, Roseximbank and EXIAR, a member of the REC Group, provide businesses with access to borrowed financial resources on favourable terms”, Manturov said.

“You can only enter the African continent in principle with infrastructure and state support. Because the African continent, of course, is very attractive for investment. We all understand how many people live there, what potential there is, and what the potential for growth is, but there are huge financial, logistical, political, and other risks there, and it’s a rather risky task to go alone against the tide and take these risks upon ourselves”, Mazepin said.

Creating mechanisms to fund mutual trade and joint projects

“Today, we signed an extremely important agreement on the sidelines of this Forum to create a trade financing platform jointly with VEB.RF, Sberbank, our export center, and international companies. This allows for our trade turnover to include both the resources of Russian banks and the liquid resources that African countries sell to the world […]. So far, we have incorporated approximately ten African countries into this loop, but we understand that we can expand the mechanism as it develops. So, the goal that President Vladimir Putin spoke about this morning in his speech to double our trade turnover is absolutely real”, said Andrey Slepnev, Director General of Russian Export Center.

“At present, Vi Holding, in collaboration with Afreximbank, the state-owned Giprotsvetmet company, and Russian Export Center, is developing a new platform, including on the sidelines of this Forum, which will become a major project to create a large-scale interstate platform for the implementation of mining projects in African countries. We are talking about developing an integrated system of collaboration between Russia and the African countries, pan-African financial institutions, and investors that are interested in doing so in order to create tools to fund geological exploration and prospecting that are to be carried out mainly by specialized Russian organizations. This also implies getting Russian business structures involved in the commercial development of deposits according to the priority list of resources and under state guarantees from African states”, Nigmatulina said.

 

 

For more information, visit the Roscongress Information and Analytical System at roscongress.org

To participants in the Russia–Africa Economic Forum

Ladies and gentlemen,

It gives me great pleasure to welcome you at the opening of the Russia–Africa Economic Forum.

The rich history of relations between Africa and Russia has never seen an event of a similar scale. Members of government agencies and business community, and experts are meeting at this Forum to substantively discuss the current status and prospects of cooperation and a wide range of topical issues of the world economy.

Today, the countries of Africa are well on their way towards social, economic, scientific and technological development, and are playing a significant role in international affairs. They are strengthening mutually beneficial integration processes within the African Union and other regional and sub regional organizations across the continent.

In recent years, the traditionally friendly ties of partnership between Russia and Africa have gained new momentum, both at a bilateral level and in various multilateral formats. In addition to preserving our past experience of successful cooperation, we have also managed to make significant new steps forward. Trade and investment are growing dynamically, and new joint projects are under way in extractive industries, agriculture, healthcare, and education. Russian companies are ready to offer their scientific and technological developments to their African partners, and share their experience of upgrading energy, transport and communications infrastructures.

I hope that the Forum will help identify new areas and forms of cooperation, put forward promising joint initiatives that will bring the collaboration between Russia and Africa to a qualitatively new level and contribute to the development of our economies and the prosperity of our peoples.

I wish the Forum’s participants fruitful work and all the best.

Vladimir Putin

The Russia–Africa Summit, which is taking place in Sochi on 23–24 October 2019, encapsulates the historically friendly relations between the African continent and the Russian Federation. This Summit carries great significance as it is the first of its kind to emerge during a period of major global and international transformations. In response to the aspirations of the people it is representing, the Summit intends to build a comprehensive framework for expanding Russian–African relations into broader horizons of joint cooperation across different fields.

The African nations and Russia share a common understanding of international relations, based on the principles of respect for the rule of international law, equality, non-interference in the internal affairs of states, and the peaceful resolution of disputes. Both sides affirm their commitment to support multilateral actions to oppose new international threats, be they terrorism and extremism in all their forms, or declining growth rates. The two sides share a firm conviction regarding the importance of developing trade flows and supporting mutual investment in such a way as to ensure security, peace and development for the African and Russian people.

African countries have huge potential and opportunities that will allow them, once efforts to streamline their economies have been achieved, to emerge as real global players. In recent years, the nations of this continent have achieved major successes spanning the political, economic, social and administrative spheres. Africa has flourished in terms of growth over the past decade, reaching a continent-wide growth rate of 3.55% in 2018.

The African Union Summit, which was held in Niger in July 2019, continued the efforts of the African countries and saw the African Continental Free Trade Agreement come into force, along with its operational instruments. The agreement is one of the key objectives of Agenda 2063, an African development strategy that has been created to address the African people’s desire for prosperity and decent living standards.

These successes are opening up wide-ranging prospects for cooperation between African countries and the Russian Federation, and confirm the determination of African governments and their people to cooperate with multiple partners in order to establish mutually beneficial relations.

With this in mind, we express our hopes that the Russia–Africa Summit will help in the establishment of constructive strategic relations, based on partnership between two sides across various fields, and in the service of fulfilling the hopes and aspirations of the African people and their friends in Russia.

President of the Arab Republic of Egypt
Abdelfattah ALSISI